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I think people who have amassed a quantity of these are going to learn a real lesson in the meaning of value. There's a reason precious metals like gold and si

by Ologn 13y ago

I think people who have amassed a quantity of these are going to learn a real lesson in the meaning of value. There's a reason precious metals like gold and silver have retained value for millennia, and schemes like this have not. The VCs who have peddled this garbage are going to look like a bunch of frauds and fools. Not that it will materially affect them. The Cassandras who have been warning about Bitcoin will continue to be ignored, the press will still beat a door to put a microphone in front of these snake oil peddlers. With the talk of a bubble - if there is any sign of a bubble, it is a bunch of useless hashes like Bitcoin becoming worth $5-12 billion. I suggest anyone who bought Bitcoins go read the Bitcoin FAQs of why Bitcoins are worth anything. It is complete nonsense. Moreover it is not falsifiable. It is basically "they are worth something because people think they are worth something". So even if Bitcoin crashes, that theory can still stand, since it can not be falsified. That stripe of value theorist can just say people stopped thinking Bitcoins were valuable, so their price fell. Wise people can take the rise and fall of Bitcoin and ask real questions about where the value of commodities come from. The answer of the Bitcoin theorists, which is not that far off from mainstream economists, is a far cry from what economists like Benjamin Franklin, David Ricardo, Adam Smith thought the value of commodities came from. I already mentioned how precious metals have retained value over millenia. Some Bitcoin advocates point to the dollar and say if the dollar retains value, why can't Bitcoin? This is a complex issue which would take too long to go into here. For one thing, the dollar does not retain its value - a dollar from today is worth much less than a dollar in 1978. Also, the conspiratorial gold bugs who say the dollar is about to collapse are probably overstating the immediacy of the problem - but that does not mean there is not a kernel of truth to their worries about paper currency. Just look at the history of currency from antiquity up until the Weimar Germany Mark to see why. No magic bullet has been found since then making the dollar bullet proof. Their worries may well be found to be correct, although probably are nothing to worry about for several decades.

Edmond 13y ago
I penned a short blog post a year ago posing similar questions about the inherent value of a bitcoin: http://colabopad.blogspot.com/2013/04/bitcoins-agent-smith-problem.html http://colabopad.blogspot.com/2013/04/bitcoins-agent-smith-p... I think there is a future in virtual currency but it will have to be anchored to reality.
BorisMelnik 13y ago
I definitely get what you are saying. Some people will learn some tough lessons and go broke others will learn the same lesson and get rich. "they are worth something because people think they are worth something". gold and the paper currency is printed on is only worth something because people think they are worth something.
- Ologn 13y ago
  > gold and the paper currency is printed on is only worth something because people think they are worth something Gold has value. It can be used by dentists. It can be used in electronics. It has been inherently valuable for millennia. As I said, paper currency is too complex a topic to go into fully here. Unlike gold, it obviously is not inherently valuable. You can look at Weimar German marks, Confederate dollars etc. to see that. Or even a US 1978 dollar versus a US 2014 dollar, to some extent. People who think Bitcoins can be worth something because the dollar seems to have some value are going to learn a hard lesson.
  - grlhgr420 13y ago
    the dollar's 'inherent' value is linked to the long term stability of the US regime, which has a lot more utility than dental fillings
    - ericd 13y ago
      And it's backed by the faith in the US military to enforce US sovereignty and interests.
  - deleted 13y ago
    [deleted]
  - drewblaisdell 13y ago
    > Gold has value. It can be used by dentists. It can be used in electronics. It has been inherently valuable for millennia. This is a moot point. The value of gold is almost totally unrelated to its utility.
Houshalter 13y ago
It doesn't really matter. Even if bitcoin drops to five cents a coin, it can still be used as a currency. It's only bad for people storing their wealth in bitcoin which everyone knew was a bad idea - it's always been extremely volatile. The hope is that someday it will stabilize, but no one was ever claiming that it was in the present. I'm sick of people treating the exchange rate of bitcoin as a metric for how successful it is. It doesn't matter. >There's a reason precious metals like gold and silver have retained value for millennia, and schemes like this have not. Ironic you would mention that. Gold only has value because people believe it has value. It's also somewhat volatile and not immune to bubbles. Paper currencies are far more widely used and accepted than bitcoin and work just fine.
- Edmond 13y ago
  >Gold only has value because people believe it has value. Not true, gold has both ornamental and practical value (can be used in semiconductor components for instance).
  - Houshalter 13y ago
    Electronics are a new thing, for most of history it was primarily used as money. I also don't think the majority of it's value comes from jewelry.
    - Edmond 13y ago
      It was used as money because of its ornamental value and it derived its ornamental value from its inherent properties, for instance the fact that it doesn't perish,rust or degrade. A cursory read of history would show that jewelry/ornaments are huge factor in the historical value of gold.
  - gnaritas 13y ago
    Gold's actual value as a metal is a small fraction of its current price. The vast majority of the value of gold is speculatory in nature.
- 13y ago
pessimizer 13y ago
Great post. I'm fascinated by bitcoin. I think that a lot of good papers will be written about it, we as a world will advance our understanding of economics a bit, and it will inspire things that will outlast it by far. I'm not interested in buying any. Very unusual natural experiment.
Ologn 13y ago
I see the bagholders and snake oil peddlers have downvoted me into oblivion (Edit: Actually my parent post is ping-ponging but in negative territory at the time of this edit) Here is a post I made 143 days ago, at a time when Bitcoin was seeing high after high every day - https://news.ycombinator.com/item?id=6753545 https://news.ycombinator.com/item?id=6753545 Bitstamp Bitcoin was worth $460 that day. Today it is worth $350. People who would have listened to me and those who agree with me then would be a lot better off now, especially if they had shorted Bitcoin (which is doable, sort of). I was right saying Bitcoin will go down. It will continue to go down. That the Bitcoin bagholders and snake oil peddlers of HN will downvote me into oblivion is instructive. Not that I mind, I am only losing a little bit of HN karma while they have obviously lost thousands of dollars. They would be better off cutting their losses and trying to learn a lesson about their mistaken belief system then deciding to remove karma from those who observe that the emperor wears no clothes.
- ssully 13y ago
  I think your down votes are coming because of your hostile tone. You make plenty of fair points, but your tone and insults are making them meaningless.
- dang 13y ago
  Please don't complain about downvotes on HN. As the guidelines say: it never helps, and it makes for boring reading.
Geee 13y ago
Money is used to exchange goods and services between people. Any kind of money has inherent utility value, just by being money. Bitcoin is currently the best form of money ever invented. Speculative market value predicts this utility value.
deleted 13y ago
[deleted]
doyoulikeworms 13y ago
> There's a reason precious metals like gold and silver have retained value for millennia Yeah, because gold and silver are good to use as money. They are fungible, long lasting, easily identifiable, can be divided without losing total value. Kinda like bitcoin, except it can be traded with anyone with a computer over the Internet.
- karmajunkie 13y ago
  Unlike bitcoin, however, they have the trust of most people on the planet. They can trade hands without electricity and connectivity. And people understand them, how they work as a proxy for value, and while they certainly have their drawbacks, they are mostly stable in value. Bitcoin has plenty of uses that gold and silver can't touch. But that doesn't make it a precious metal by any stretch.

by Ologn 13y ago

Edmond 13y ago

I penned a short blog post a year ago posing similar questions about the inherent value of a bitcoin: http://colabopad.blogspot.com/2013/04/bitcoins-agent-smith-problem.html http://colabopad.blogspot.com/2013/04/bitcoins-agent-smith-p... I think there is a future in virtual currency but it will have to be anchored to reality.

BorisMelnik 13y ago

I definitely get what you are saying. Some people will learn some tough lessons and go broke others will learn the same lesson and get rich. "they are worth something because people think they are worth something". gold and the paper currency is printed on is only worth something because people think they are worth something.

Ologn 13y ago
> gold and the paper currency is printed on is only worth something because people think they are worth something Gold has value. It can be used by dentists. It can be used in electronics. It has been inherently valuable for millennia. As I said, paper currency is too complex a topic to go into fully here. Unlike gold, it obviously is not inherently valuable. You can look at Weimar German marks, Confederate dollars etc. to see that. Or even a US 1978 dollar versus a US 2014 dollar, to some extent. People who think Bitcoins can be worth something because the dollar seems to have some value are going to learn a hard lesson.
- grlhgr420 13y ago
  the dollar's 'inherent' value is linked to the long term stability of the US regime, which has a lot more utility than dental fillings
  - ericd 13y ago
    And it's backed by the faith in the US military to enforce US sovereignty and interests.
- deleted 13y ago
  [deleted]
- drewblaisdell 13y ago
  > Gold has value. It can be used by dentists. It can be used in electronics. It has been inherently valuable for millennia. This is a moot point. The value of gold is almost totally unrelated to its utility.

Houshalter 13y ago

It doesn't really matter. Even if bitcoin drops to five cents a coin, it can still be used as a currency. It's only bad for people storing their wealth in bitcoin which everyone knew was a bad idea - it's always been extremely volatile. The hope is that someday it will stabilize, but no one was ever claiming that it was in the present. I'm sick of people treating the exchange rate of bitcoin as a metric for how successful it is. It doesn't matter. >There's a reason precious metals like gold and silver have retained value for millennia, and schemes like this have not. Ironic you would mention that. Gold only has value because people believe it has value. It's also somewhat volatile and not immune to bubbles. Paper currencies are far more widely used and accepted than bitcoin and work just fine.

Edmond 13y ago
>Gold only has value because people believe it has value. Not true, gold has both ornamental and practical value (can be used in semiconductor components for instance).
- Houshalter 13y ago
  Electronics are a new thing, for most of history it was primarily used as money. I also don't think the majority of it's value comes from jewelry.
  - Edmond 13y ago
    It was used as money because of its ornamental value and it derived its ornamental value from its inherent properties, for instance the fact that it doesn't perish,rust or degrade. A cursory read of history would show that jewelry/ornaments are huge factor in the historical value of gold.
- gnaritas 13y ago
  Gold's actual value as a metal is a small fraction of its current price. The vast majority of the value of gold is speculatory in nature.
13y ago

pessimizer 13y ago

Great post. I'm fascinated by bitcoin. I think that a lot of good papers will be written about it, we as a world will advance our understanding of economics a bit, and it will inspire things that will outlast it by far. I'm not interested in buying any. Very unusual natural experiment.

Ologn 13y ago

I see the bagholders and snake oil peddlers have downvoted me into oblivion (Edit: Actually my parent post is ping-ponging but in negative territory at the time of this edit) Here is a post I made 143 days ago, at a time when Bitcoin was seeing high after high every day - https://news.ycombinator.com/item?id=6753545 https://news.ycombinator.com/item?id=6753545 Bitstamp Bitcoin was worth $460 that day. Today it is worth $350. People who would have listened to me and those who agree with me then would be a lot better off now, especially if they had shorted Bitcoin (which is doable, sort of). I was right saying Bitcoin will go down. It will continue to go down. That the Bitcoin bagholders and snake oil peddlers of HN will downvote me into oblivion is instructive. Not that I mind, I am only losing a little bit of HN karma while they have obviously lost thousands of dollars. They would be better off cutting their losses and trying to learn a lesson about their mistaken belief system then deciding to remove karma from those who observe that the emperor wears no clothes.

ssully 13y ago
I think your down votes are coming because of your hostile tone. You make plenty of fair points, but your tone and insults are making them meaningless.
dang 13y ago
Please don't complain about downvotes on HN. As the guidelines say: it never helps, and it makes for boring reading.

Geee 13y ago

Money is used to exchange goods and services between people. Any kind of money has inherent utility value, just by being money. Bitcoin is currently the best form of money ever invented. Speculative market value predicts this utility value.

deleted 13y ago

[deleted]

doyoulikeworms 13y ago

> There's a reason precious metals like gold and silver have retained value for millennia Yeah, because gold and silver are good to use as money. They are fungible, long lasting, easily identifiable, can be divided without losing total value. Kinda like bitcoin, except it can be traded with anyone with a computer over the Internet.

karmajunkie 13y ago
Unlike bitcoin, however, they have the trust of most people on the planet. They can trade hands without electricity and connectivity. And people understand them, how they work as a proxy for value, and while they certainly have their drawbacks, they are mostly stable in value. Bitcoin has plenty of uses that gold and silver can't touch. But that doesn't make it a precious metal by any stretch.